In re Galluzzo
| Decision Date | 14 August 2018 |
| Docket Number | Case No.: 06-15392-SLM |
| Parties | In Re: DOMINICK GALLUZZO, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NOT FOR PUBLICATION
APPEARANCES:
Ward W. Benson, Esq.
Trial Attorney, Tax Division
U.S. Department of Justice
P.O. Box 227
Ben Franklin Station
Bruce H. Levitt, Esq.
Levitt & Slafkes, P.C.
515 Valley Street
Suite 140
Maplewood, NJ 07040
Kenneth R. Cohen, Esq.
Davidson, Sochor, Ragsdale & Cohen, LLC
619 River Drive, Suite 200
Elmwood Park, NJ 07047
Special Counsel to Dominick Galluzzo
David R. Hock, Esq.
Local 282 Welfare Trust Fund, Local 282 Annuity Trust Fund, &
Before the Court is creditor Internal Revenue Service's ("IRS") Motion to Enforce the Chapter 11 Plan and Confirmation Order ("Motion to Enforce Plan and Confirmation Order"). The IRS contends that the priority and amount of its allowed secured tax claim was fixed in a Stipulation and Order Determining Liens and Priority on Ocean County Property ("Stipulation and Order") between debtor Dominick Galluzzo ("Debtor") and his creditors, which was incorporated into the Order Confirming First Modified Chapter 11 Plan ("Confirmation Order"). According to the IRS, Debtor is evading his obligation to pay the IRS's claim as required by the Confirmation Order, and instead has attempted for years to challenge the underlying tax assessments in various non-bankruptcy courts. The IRS argues that Debtor nevertheless remains bound to pay the IRS's claim under the Stipulation and Order and the Confirmation Order. Debtor responds with numerous arguments to explain why he does not have to pay the IRS's claim in spite of the Stipulation and Order and the Confirmation Order.
This Court finds Debtor's arguments unpersuasive and irreconcilable with the procedural history of this case. Debtor made a deal. The deal required Debtor to pay the IRS, but it also enabled Debtor to confirm his plan and exit bankruptcy. The deal was incorporated into the Confirmation Order, entered by this Court. Years later, with the deadline to pay the IRS approaching, Debtor decided he no longer liked the deal. Instead of complying with his obligation or coming back to this Court to seek relief, he elected to try to undo the deal in any non-bankruptcy forum he could. In fact, Debtor challenged the IRS's claim in four other courts post-confirmation: the United States Tax Court, the United States Court of Appeals for the Third Circuit (on appeal from the tax court), and twice in the United States District Court for the District of New Jersey.None of these courts absolved Debtor of his obligation under the Confirmation Order, and the tax court and the District Court each found, among other things, that it lacked jurisdiction to resolve the matter. However, Debtor managed to find some helpful dicta in each court's decision and ran to the next court with it, hoping for a better result. Now—the second time Debtor's dispute with the IRS has come before this Court—Debtor contends that this Court must free him of his obligation to pay the IRS based on the tax court's finding relating to jurisdiction.
This case clearly has a long and tortuous history. In 2015, during the second case Debtor commenced post-confirmation in the District Court for the District of New Jersey, the Honorable Mark Falk, United States Magistrate Judge, said "[a] court somewhere will eventually have to unravel" how the history of this case "impacts the IRS liens in place."1 This is that Court. For the reasons stated below, the IRS's Motion to Enforce Plan and Confirmation Order is GRANTED.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(b)(1), and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984 and amended September 18, 2012. This matter concerns the administration of the bankruptcy estate, as well as a determination of the validity and extent of a lien. It therefore constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (K) and (O). Venue is proper under 28 U.S.C. § 1408. The Court issues the following findings of fact and conclusions of law.
The pertinent facts are largely undisputed. On June 15, 2006, Debtor filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code").2 Schedule A indicated that Debtor held an interest in two pieces of real property: 145 Nedellec Drive, Saddle Brook, New Jersey 07663 (the "Saddle Brook Property"), and 1 Seventh Avenue, Ortley Beach, New Jersey 08735 (the "Ortley Beach Property").3 On Schedule D, Debtor listed the IRS as a secured creditor with a disputed claim of $1,000,000.00.4 On June 29, 2006, the IRS filed a proof of claim in the amount of $1,268,527.08.5 On September 5, 2006, the IRS filed an amended proof of claim in the amount of $1,277,495.57.6 The total amended claim consisted of: (1) a $1,255,211.34 secured claim for tax years 1999, 2000, 2001 and 2003; (2) a $17,188.62 priority claim for tax year 2004; and (3) a $5,095.61 general unsecured claim.7
On July 27, 2006, Debtor initiated an adversary proceeding against creditor Lumbermens Mutual Casual Company seeking to avoid a lien on the Ortley Beach Property (the "Adversary Proceeding").8 On February 7, 2007, Debtor amended his complaint to add counts seeking to fix the extent, validity and priority of the alleged liens of, among others, the IRS, as well as Theodore King and Larry LaBarberra as Trustees and Fiduciaries of Local 282 Trust Funds, the Local 282 Welfare Trust Fund, the Local 282 Annuity Trust Fund, the Local 282 Job Training Trust Fund and the Local 282 Vacation and Sick Leave Trust Fund (collectively, the "Local 282 TrustFunds").9 In the amended complaint, Debtor asserted the bankruptcy court had jurisdiction over the Adversary Proceeding under 28 U.S.C. §§ 157 and 1334 and that the Adversary Proceeding was a core proceeding under 28 U.S.C. § 157(b)(2)(F), (K) & (O).10
In the amended complaint, Debtor specifically requested that the bankruptcy court fix the extent, validity and priority of the IRS's liens.11 Debtor alleged, among other things, that:
On March 14, 2007, while the Adversary Proceeding was pending, Debtor filed his First Modified Chapter 11 Plan (the "Plan").13 The Plan included a subsection entitled "Procedures for Resolving Contested Claims", which provided that:
Objections to Claims and interests, except for those Claims more specifically deemed Allowed in the Plan, may be filed by the Reorganized debtor or any party in interest up to and including sixty (60) days following the entry of the Confirmation Order.14
The Plan defined the term "Allowed" as follows:
Allowed when used as an adjective preceding the words "Claims" or "Equity Interest", shall mean any Claim against or Equity Interests of the debtor, proof of which was filed on or before the datedesignated by the Bankruptcy Court as the last date for filing proofs of claim or Equity Interest against such debtor . . . .15
The Plan expressly addressed the IRS's secured claim in the subsection entitled "Classes of Secured Claims." Specifically, the Plan provided that the "Internal Revenue Service Federal tax lien on Ortley Beach and Saddle Brook properties" was "to remain on Ortley Beach and Saddle Brook properties up to the equity in those properties after liens of classes 1, 2, 3 and 4 creditors."16
In the subsection entitled "Retention of Jurisdiction," the Plan provided:
On February 25, 2008, the Honorable Donald H. Steckroth, United States Bankruptcy Judge, entered the Stipulation and Order resolving the Adversary Proceeding.18 Although the "Whereas" clauses in the Stipulation and Order focused on the dispute about the relative prioritiesof the IRS's and Local 282 Trust Funds' liens,19 the Stipulation and Order's numbered paragraphs in fact determined the defendants' liens and priority on the Ortley Beach Property between the IRS, the Local 282 Trust Funds, and the other defendants.
The Stipulation and Order provided:
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